25 Years Experience
Income from any source such as salary, a business, rents, investments, and more is taxable. Tax saving is a practice of saving tax by making investment declarations. However various sections of the Income-tax Act allow deductions as per the stipulated guidelines.
Section 80C reduces tax liabilities by allowing deductions from total taxable income in a financial year if your investments come under the following schemes and expenses:
- Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution.
- If the fund sells securities that have increased in price, the fund has a Capital Gain. Most funds also pass on these gains to investors in the form of distribution.
- If fund holdings increase in price but are not sold by the fund manager, the fund’s shares increase in price. You can then sell your mutual fund shares for a profit.